THE  FINANCIAL  AND  TRADE 
SITUATION,  PAST,  PRESENT 
AND  FUTURE 

^3  8 REVIEWING  THE 

' CRISIS  OF  1907,  WITH. 

CAUSES  AND  REMEDIES 


/ 

AN  ADDRESS 

^ By  Henry  Clews,  ll.d. 


Delivered  at  the  Annual  Meeting  .of  the  Pittsburg 
Chapter,  American  Institute  of  Banking,  at 
Pittsburg,  Pa.,  on  Tuesday  Evening, 


February  25,  1908| 


N 

II,  fF  ILL  1 n. 


Financial  and  Trade  Situation,  Past,  Pres- 
ent and  Future,  Reviewing  the  Crisis  of 
1907,  With  Causes  and  Remedies 
An  Address  By  HENRY  CLEWS,  LL.D., 

Delivered  at  the  Annual  Meeting  of  the  Pittsburg  Chapter,  American  Institute 
of  Banking,  at  Pittsburg,  Pa.,  on  Tuesday  Evening,  February  25,  1908. 


It  gives  me  no  ordinary  pleasure  to  address  an  audience  of  Pittsburg  bankers, 
for  Pittsburg  is  the  hul)  of  our  iron  and  steel  industry,  and  as  it.  has  no  rival 
in  the  manufacture  of  iron  and  steel,  it  may  well  feel  proud  of  its  supremacy. 
It  is  no  exaggeration  to  say  that  the  rise  and  progress  of  that  industry  in  Pitts- 
burg is  one  of  the  marvels  of  the  age.  A few  years  ago  Pittsburg  was  known 
in  New  York  as  the  Smoky  City.  A little  later  she  became  known  as  the 
City  of  Steel  and  Coal.  Now,  through  the  alchemy  of  the  brain  of  your  wise 
men,  she  is  known  as  the  place  where  smoke  and  coal  and  steel  are  in  some 
mysterious  way  mixed  up  in  such  a form  that  they  fill  your  pockets  with  pure 
gold.  To  the  millionaire  of  to-day  we  bow  in  deference  to  his  wealth.  But  to 
the  grimy  sons  of  toil,  who  planted  the  seed  and  bore  the  burdens  of  the  earlier 
days,  we  take  off  our  hats  with  reverence.  The  founders  of  your  city  chose  wisely 
in  selecting  this  spot  for  settlement,  at  the  river’s  junction,  in  the  midst  of  rich 
deposits  of  coal  and  iron.  It  seems'Tather  'odd  that  your  two  greatest  products 
should  be  glass,  which  is  brittle,  and  steel,  which  is  tough.  You  also  excel  in 
producing  cork,  which  is  light,  and  iron,  which  is  heavy.  Surely  extremes  meet 
in  your  city  as  well  as  rivers.  Down  our  way  we  wonder  what  you  do  not  pro- 
duce when  we  learn  of  the  diversity  of  your  wares.  It  certainly  seems  to  me 
that  a man  could  learn  a whole  lot  if  allowed  to  visit  all  your  various  foundries, 
factories  and  mills,  but  it  would  take  him  nearly  as  long  as  to  go  through  college, 
as  their  name  is  legion.  The  welcome  which  you  have  given  me  touches  me 
deeply,  and  I assure  you  that  in  future  I shall  preach  the  doctrine  that  there  are 
others  in  Pittsburg  whose  mission  it  is  to  dispense  happiness  besides  Mr.  Car-4 
negie. 

If  we  glance  at  *the  history  of  steel  manufacturing  in  the  United  States, 
we  find  it  centered  in  and  very  largely  confined  to  Pittsburg,  and  if  we  recall 
the  enormous  fortunes  made  in  that  industry  by  Mr.  Carnegie  and  many  others, 
under  the  protection  of  high  tariff,  we  see  one  of  the  greatest  wonders  of  trade 
development  and  modern  enterprise. 

Yet  it  was  not  until  after  the  beginning  of  the  war  between  the  North  and 
the  South — the  great  conflict  waged  from  1861  to  1865 — that'  any  large  or  even 
considerable  amount  of  steel  was  manufactured  in  the  United  States.  But  now 
we  lead  the  world  in  making  it,  and  Pittsburg  is-  our  great  source  of  supply.  At 
the  same  time,  we  can  justly  say  that  the  march  of  invention  and  modern  im- 
provement in  other  directions  has  kept  pace  with  the  growth  of  Pittsburg  and 
our  marvelous  progress  in  iron  and  steel-making. 

This  reflection  is  particularly  gratifying  in  view  of  our  recent  financial  crisis, 
in  which  New  York  was  the  storm-center,  and  Pittsburg  almost  as  stormy  for  a 
time.  But  both  cities,  like  the  country  at  large,  stood  up  bravely  and  made  the 
best  of  the  situation  by  all  the  means  at  their  command.  Both  fortified  them- 
selves by  a good  emergency  measure  and  issued  Clearing  House  Certificates, 
according  to  their  needs.  Pittsburg,  however,  went  one  or  two  better  than  New 
York,  and,  like  many  other  cities,  issued  scrip;  and  better  still  no  one  in  Pitts- 
burg refused  it,  not  even  a car  conductor  for  fares.  Here  was  public  spirit  rising 
almost  to  the  height  of  patriotism. 

Now,  Pittsburg  in  common  with  the  rest  of  the  country  is  again  about  on  an 
even  keel  financially,  with  its  banks  on  a cash  basis,  its  cashiers’  certificates  and 

a 


33  :c- 

scrip  redeemed,  and  its  Stock  Exchange  reopened.  But  unfortunately  the  crisis 
gave  industry  a blow  from  which  it  has  not  yet  recovered,  although  conditions 
are  steadily  improving  all  over  the  United  States.  The  iron  and  steel  industry 
received  the  hardest  blow  of  all,  and  from  a feast  you  quickly  passed  to  a famine, 
which  is  a way  the  iron  trade  always  had.  It  is  proverbially,  however,  as  quick 
to  recover  as'to  collapse;  so  all  we  have  to  do  is  to  keep  up  our  courage  and  wait, 
and  we  may  feel  assured  there  is  a good  time  coming.  But  whether  it- will  come 
soon,  or  later,  is  a question  about  which  iron-masters,  financiers,  and  trade 
doctors  generally  are  much  divided  in  opinion  at  present.  It  is  'a  good  sign, 
however,  that  work  has  been  resumed  in  fully  three-fourths  of  the  entire  Du- 
quesne  works  of  the  United  States  Steel  Corporation  in  Pittsburg,  although  it  is 
admitted  that  only  46  per  cent,  of  all  the  Corporation’s  works  are  running. 

In  September,  1906,  when  stock  and  bond  prices  were  manipulated  abnormally 
to  a 3^2  per  cent,  basis,  while  six  months’  money  was  loaning  at  6 per  cent., 
it  was  evident  that  one  or  the  other  was  too  high;  and  considering  the  growing 
demand  for  the  use  of  money  it  became  quite  apparent  it  was  not  money  that 
wwas  too  dear,  but  securities.  At  that  time  I persistently  advised  every  one  to 
Wjget  out  of  stocks  and  out  of  debt,  and  keep  out  for  a prolonged  period. 

Since  then  security  values  went  down  prodigiously  — $3,500,000,000  would 
;?>scarcely  cover  the  depreciation  at  its  lowest  point  of  those  dealt  in  on  the 
\ New  York  Stock  Exchan’ge  alone.  Our  financial  situation  is  vastly  different, 
"^however,  from  what  it  was  in  any  of  our  previous  great  panics,  of  which  there 
<^have  been  a number,  since  that  of  1857,  which  began  with  the  failure  of  the 
r>  Ohio  Life  & Trust  Co.  at  the  time  of  my  advent  in  Wall  Street.  I have  been 
|-Un  all  the  subsequent  panics,  and  the  present  conditions  differ  from  those  of  all 
^he  other  great  financial  storms  because  the  wealth  of  the  nation  has  become 
'-J-%0  vast  as  to  make  it  the  richest  in  actual  wealth  and  productiveness  of  all 
nations.  As  a matter  of  fact,  our  wealth  making  developments  have  been  so  ex- 
tensive and  excessive  as  to  have  forged  ahead  of  our  banking  facilities.  This 
has  had  much  to  do  with  our  recent  setback.  Wise  and  sagacious  capitalists  saw 
the  handwriting  on  the  wall  in  Wall  Street  and  elsewhere,  and  those  who  did 
unloaded  their  securities  in  1906,  dumping  their  stocks  at  top  notch  prices, 
amounting  to  at  least  $1,000,000,000,  upon  weaker-backed  people. 

This  unloading,  together  with  the  San  Francisco  earthquake  disaster,  which 
wiped  out  $350,000,000  of  property,  struck  the  staggering  blows  which  did  more 
than  anything  else  to  pave  the  way  to  the  recent  panic  conditions.  The  selling 
out  by  big  holders  was  followed  by  all  the  large  railroad  systems  in  the  country 
selling  huge  amounts  of  bonds,  stocks  and  short  term  notes.  These  being  of- 
fered to  stockholders  of  record  at  apparently  tempting  prices,  were  floated.  But 
this  great  mass  of  new  securities  coming  on  the  market  was  an  indigestible  one 
and  absorbed  the  capital  of  a very  large  number  of  the  riefi  men  of  the  country 
and  put  it  in  fixed  form;  and  most  of  these  heretofore  very  rich  men  have  ever 
since  been  in  the  position  of  a man  who,  having  had  a “Sherry  dinner,”  is  urged  to 
accept  another  dinner  at  Delmonico’s  immediately  afterwards — his  wish  strong 
but  his  capacity  lacking. 

What  produced  the  panic  was  a number  of  adverse  factors  happening  one 
after  another  in  rapid  succession. 

I summarize,  briefly,  the  causes  as  follows  : 

r 

FIRST. 

The  Boer  war  which  left  England  in  almost  as  bad  a financial  strait  as  we 
- were  in  through  the  culmination  of  a similar  period  of  overdoing  in  trade  and 
speculation  in  new  industrial  ventures,  together  with  an  excess  of  new  issues  of 
British  Consols  during  the  war  period  resulting  in  a recent  decline  in  the  price 
of  these  prime  securities  to  81 — about  the  lowest  price  on  record. 

. SECOND. 

I 

j Germany  was  in  fully  as  bad  a condition  owing  to  extravagant  industrial  en- 

terprises, rivalling- our  own,  and  which  required  the  most  careful  nursing  to  avoid 
a collapse. 


3 


THIRD. 


I'rancc  acted  alone  in  financing  Russian  loans  and  in  the  crisis  of  the  Japanese- 
Riissian  war  was  compelled  unwillingly  to  supply  new  funds  in  order  to  protect 
the  French  loans  already  outstanding.  Hence  France  had  little  or  no  money  to 
lend  except  to  the  French. 

FOURTH. 

The  Japanese-Russian  war  brought  both  of  these  countries  forward  for  the 
first  time  as  prominent  and  important  factors  in  the  world’s  money  market,  and 
both  are  still  like  Oliver  Twist,  crying  for  “more.”  This  conflict  and  the  Boer 
war  combined  wasted  over  $2,000,000,000  of  capital. 

FIFTH. 

Funds  were  almost  unobtainable  except  at  prohibitive  rates  at  the  time  of 
our  recent  crop  moving  period,  and  for  causes  already  mentioned  we  could  not 
look  to  Europe  for  help.  Usually  Europe  discounts  New  York  securities  bills  for 
about  $300,000,000  at  this  period,  but  last  year  Europe  said:  “No;  we  have  troubles 
of  our  own.” 

SIXTH. 

The  California  earthquake  with  losses  of  $350,000,000,  and  the  Chili  and  other 
earthquakes  of  less  importance  and  severity  in  various  parts  of  the  world  were 
heavy  blows  at  prosperity. 

SEVENTH. 

The  compulsory  unloading  of  very  many  milfions  of  dollars  of  stocks  and 
bonds  by  large  capitalists  and  operators,  together  with  immense  sales  of  new 
securities  by  corporations  and  railroads,  and  the  manipulation  of  prices  and 
stocks  up  to  a 3^  per  cent,  interest  basis  v/hile  time  money  was  loaning  at  6 per 
cent.,  and  above,  on  the  best  of  collateral.  Besides  which  heavy,  excessive  and 
reckless  operations  in  real  estate  and  mining  enterprises  having  been  made  all 
over  the  nation,  caused  large  amounts  of  capital  to  lose  its  liquid  quality  and 
become  fixed. 

EIGHTH. 

The  investigation  of  the  great  life  insurance  companies  and  the  Metropolitan 
railroad,  and  the  sad  disclosures,  followed  by  the  absurd  fine  of  $29,400,000  by 
Judge  Landis  against  a corporation  with  a capital  of  only  $1,000,000,  had  a de- 
moralizing effect  upon  the  public  mind.  This  preposterous  fine  savored  of  con- 
fiscation and  alarmed  investors. 

NINTH. 

The  Interstate  Commerce  Commission’s  examination  of  the  Chicago  & Alton 
deal  and  the  consequent  developments  further  undermined  the  confidence  of  in- 
vestors. 

TENTH. 

The  making  of  injudicious  loans  by  the  Knickerbocker  Trust  Co.  and  the 
chain  of  banks,  both  in  Manhattan  and  Brooklyn,  which  caused  the  suspension 
of  the  institutions  and  arrests  of  officials  on  criminal  charges  intensified  public 
distrust,  while  the  collapse  of  the  Copper  market  unsettled  the  metal  markets 
all  over  the  world  and  resulted  in  a reduction  of  dividends  on  copper  shares, 
and  a serious  break  in  the  price  of  all  that  class  of  securities. 

LASTLY. 

A gross  abuse  of  our  credit  system  and  the  consequent  inflation  of  all  values, 
stimulated  by  loose  banking  and  promoting  methods,  proved  the  climax  in  a 
series  of  events  which  culminated  in  the  sharpest  though  not  the  severest  panic 

4 


the  present  generation  has  experienced.  The  main  cause  of  the  panic  was 
that  of  general  overdoing.  Credit  was  over-extended;  speculation  was  reckless 
and  ill-advised;  expansion  of  every  sort  was  being  carried  to  excess  by  over- 
confidence,  until,  finally  the  country’s  floating  capital  was  practically  exhausted 
through  being  turned  too  rapidly  from  liquid  to  fixed  forms.  We  have  only  to 
glance  at  the  demands  upon  new  capital  during  the  last  year  or  two  to  realize 
this  fact. 

Some  idea  of  the  congested  state  of  the  stock  market  may  be  obtained  from 
the  fact  that  during  the  last  five  years  the  total  amount  of  new  securities  author- 
ized was  $6,800,000,000;  the  eleven  months  of  1907  alone' accounting  for  $2,000,000,- 
000  of  this  total. 

During  the  latter  period  our  railroads  authorized  $1,400,000,000  securities,  of 
which  they  were  able  to  issue  only  one-half,  owing  to  money  market  conditions. 
Of  industrial  securities  less  than  $500,000,000  were  authorized,  but  nearly  $400,- 
000,000  of  these  appear  to  have  been  issued. 

These  figures  take  no  account  of  the  issues  of  municipal  securities,  and  those 
of  many  other  business  concerns  of  a minor  character,  but  they  are  quite  suffi- 
cient to  indicate  the  extraordinary  demands  upon  the  money  market  during  the 
last  two  years,  demands  which  in  connection  with  huge  speculative  borrowings 
imposed  an  unbearable  strain  upon  the  banks  and  precipitated  the  March,  August 
and  October  collapses  in  the  stock  market.  Other  influences  have  undoubtedly 
been  at  work  to  cause  the  breakdown,  but  no  single  factor  compares  in  impor- 
^ tance  with  that  of  the  excessive  issues  of  new  securities  and  obligations  during 
the  past  two  years  which  the  country  was  utterly  unable  to  assimilate. 

In  discussing  the  cause  of  the  recent  panicky  contraction  and  disturbance  in 
the  business  and  financial  world,  nothing,  however,  could  be  further  from  the 
truth  than  to  charge  it  all  to  the  great  corporation  exposures  and  prosecutions. 

As  I have  said,  there  were  many  other  things  that  contributed  to  bring  about 
last  year’s  depression  and  disturbance,  and  jto  cast  over  the  bright  sky  of  busi- 
ness prosperity  the  heavy  clouds  of  distrust,  reaction  and  panic. 

The  recent  clouds  in  the  financial  sky  can  remotely  be  attributed  in  a large 
measure  to  the  effect  of  the  tremendous  railroad,  industrial  and  commercial  de- 
velopment of  the  last  ten  years,  which  brought  about  capital  requirements  in 
excess  of  the  ability  of  the  country  to  supply  them. 

Naturally  and  necessarily,  this  resulted  in  precautionary  steps  being  taken  by 
bankers  and  others  to  limit  demands  that  capital  could  not  supply. 

This  conservatism  and  consequent  contraction  of  the  overwhelming  volume 
of  business  will,  it  is  believed,  prove  the  strongest  force  in  averting  further  trouble 
and  disaster. 

In  an  effort  to  meet  the  demands  of  the  enormous  business  offered  them, 
the  great  railway  and  industrial  corporations  sought  to  enlarge  their  equipment 
at  vast  expense.  In  this  they  acted  unwisely.  They  overtraded.  It  was  per- 
haps excusable  not  very  long  ago,  wlien  confidence  was  in  its  zenith  and  credit 
superabundant,  to  attempt  the  financing  of  mammoth  undertakings.  But  unex- 
pectedly and  like  a bolt  out  of  a clear  sky,  came  the  startling  insurance  and  other 
exposures,  and  gradually  timidity  took  the  place  of  confidence. 

Then  capital,  which  is  always  more  timid  than  usual  at  such  times,  began  to 
contract,  and  many  railroad  and  industrial  corporations  found  themselves  unable 
to  borrow  the  large  sums  needed  to  meet  their  extraordinary  expenditures. 

The  banks,  in  many  instances,  having  already  over-extended  credits,  were 
unable  to  provide  the  necessary  funds,  and  new  securities,  owing  to  excessive  sup- 
plies and  other  causes,  ceased  to  find  the  ready  market  that  they  had  enjoyed 
for  so  long  a period.  Investors  took  wing.  Curtailment,  therefore,  in  every 
direction  became  a necessity;  President  Roosevelt  can  no  more  be  blamed  for 
the  recent  depression  and  panicky  disturbance  than  he  can  be  credited  with  all 
the  great  prosperity  that  preceded  the  crisis. 

That  this  reaction,  culminating  in  a panic  so  severe,  came  just  at  the  time 
it  did,  is  largely  if  not  wholly  coincidental.  It  cannot  be  denied,  however,  that 
the  startling  disclosures  of  wrongdoing  on  the  part  of  many  of  the  great  railroad 
and  industrial  corporations  disturbed  the  confidence  of  the  public  to  the  core,  and 
paved  the  way  to  it. 

Being  now  myself  optimistic,  I look  on  the  sunny  side  and  hope  for  the  best. 

5 


Jt  is,  Iiowevcr,  a lime  for  conservatism,  and  while  trusting  in  Providence,  it  is  ^ 
well  to  keep oiir  powder  dry.  It  is  a gofjd  time  tf>  cultivate  the  virtue  of  patience, 
and  make  haste  slowly  until  all  the  aftermath  of  the  panic,  in  the  way  of  liquida- 
tion and  the  elimination  of  unsound  timber  from  business  structures,  is  com- 
pleted. 

This  will  leave  everything  in  the  financial  and  industrial  world  stronger  than 
before.  It  will  also  leave  us  with  a higher  standard  of  business  morality  re- 
sulting from  the  exposure  of  looting  and  other  illegal  practices  and  abuses  of 
])owcr  in  the  management  of  large  corporations.  The  stoppage  of  the  evil  of 
rebating  by  the  railroads  is  of  itself  a great  gain  in  this  respect,  and  for  this 
we  have  to  thank  President  Roosevelt. 

As  to  the  future,  Pittsburg  and  the  iron  and  steel  trade  should  be  the 
first  to  feel  improvement  in  the  general  business  of  the  country,  for  iron  is  still, 
the  best  barometer  of  the  times,  as  it  leads  all  -other  industries  in  both  depres- 
sion and  recovery,  and  what  an  eventful  history  Pittsburg  can  point  to,  the 
world  knows. 

It  was  at  Pittsburg  that  the  Bessemer 'process  was  first  applied  to  steel  mak- 
ing in  America,  and  the  giant  strides  in  the  industry  that  followed  its  super- 
sedure  of  the  open  hearth  process  not  only  astonished  ourselves  but  all  Europe. 
It  was  a new  departure  on  a grand  scale,  this  application  of  science  to  mechanical 
methods,  a revelation  that  was  marvellous  in  the  trade  expansion  and  wealth  it 
produced. 

Yet  it  is  not  improbable  that  before  long,  if  not  immediately,  the  Bessemer 
process  by  which  this  immense  development  was  achieved  will  be  very  generally 
superseded  by  the  open  hearth  process  of  steel  making,  which  originated  and  had 
its  early  development  in  this  country.  Thus  in  the  whirligig  of  time  it  will  dis- 
place the  Bessemer  process,  by  which  it  was  itself  displaced.  This,  as  you  are 
of  course  aware,  is  owing  to  improvements,  chiefly  by  Talbott,  an  American  en- 
gineer, in  the  open  hearth  process,  which  for  a long  time  has  been  considered 
almost  out  of  the  race  in  competition  with  the  Bessemer  process.  This  reminds 
us  that  history  repeats  itself. 

The  open  hearth  process  has  now  been  brought  to  such  perfection  that  its 
superiority  over  the  Bessemer  process  is  declared  by  many  in  the  trade  to  be 
established.  Thus  practice  makes  perfect,  and  time  works  wonders.  Its  superi- 
ority over  the  Bessemer  process  is  said  to  have  been  particularly  demonstrated  in 
dealing  with  ores  of  any  but  a very  low  phosphorus  grade.  This  American  im- 
provement in  the  open  hearth  process  has  been  already  widely  recognized  and 
adopted  in  England,  and  we  are  in  this  wa}'-  repaying  the  debt  we  owed  to  that 
country  for  the  Bessemer  process. 

The  steel  manufactured  in  the  United  States  last  year  aggregated  23,246,000 
tons,  of  which  12,275,000  tons  were  by  the  Bessemer  process  and  10,971,000  tons 
by  the  open  hearth  process.  There  were  also  some  other  varieties  of  production, 
copied  from  processes  in  use  on  the  European  Continent,  but  the  general  drift, 

I am  informed,  is  now  towards  the  open  hearth  process. 

Out  of  Pittsburg,  of  course,  I should  not  talk  so  much  about  steel,  but  iron 
and  steel  are  Pittsburg’s  bread  and  butter.  This  reminds  me  that  apart  from  agri- 
culture the  principal  sources  of  our  national  wealth  are  minerals  and  manufac- 
turing. Mining  and  manufacturing  are  primary  and  fundamental  industries.  Our 
agricultural  income  last  year,  according  to  the  United  States  census  estimates,  was 
about  seven  thousand  millions  of  dollars,  while  the  metals  mined  were  valued  at 
about  two  thousand  millions,  against  $1,902,517,565  in  1906. 

This  metallic  product  for  the  yea-r,  it  is  estimated,  was  turned  by  manu- 
facturing it  into  materials  having  a market  value  of  fifteen  thousand  millions  of 
dollars.  If  we  add  that  of  agriculture,  the  metallic  products,  and  manufacturing, 
together,  we  have  a total  valuation  for  the  year  of  twenty-four  thousand  millions 
of  dollars.  The  fertility  of  our  natural  resources  is  here  shown  by  their  rapid 
rate  of  development.  But  this,  while  contributing  so  largely  to  our  present 
national  wealth,  is  not  an  unmixed  good.  We  should  always  bear  in  mind  that 
the  more  we  take  out  of  the  earth,  and  the  more  we  strip  our  forests  of  timber, 
the  less  we  have  remaining.  In  forestry,  however,  we  are  now  preparing  for  the 
future  by  replanting,  but  we  cannot  replant  minerals. 

The  mineral  products  of  this  country  have  more  than  trebled  since  1890; 

6 


more  than  doubled  since  1899;  and  are  more  than  five  fold  what  they  were 
in  1880.  From  1900  to  1906  our  mineral  product  increased  at  a rate  representing 
a hundred  and^  ninety  millions  a year. 

I am  quoting  these  statistics  as  a reminder  of  the  vastness  of  our  natural 
resources,  and  the  recuperative  power  of  the  nation,  which  is  one  of  the  most 
.encouraging  features  of  the  national  situation.  These  resources  are  the  back- 
bone of  the  country’s  greatness;  and  those  who  can  see  nothing  cheerful  in  the 
outlook  and  to  whom  everything  at  times  looks  as  blue  as  indigo,  will  do  well 
to  think  of  them,  for  they  are  Nature’s  national  banks,  that  can  never  fail,  and 
unfailing  sources  of  our  national  prosperity. 

It  was  these  resources,  in  the  form  of  exports  to  foreign  countries,  that  en- 
abled us  to  purchase  and  pay  for — without  borrowing  or  asking  favors — the  one 
hundred  millions  of  gold  that  we  imported  to  relieve  the  crisis.  Here  was  in- 
disputable evidence  of  the  large  international  trade  balance  in  our  favor,  and  of 
our  monetary  and  commercial  independence  of  the  rest  of  the  world;  and  this 
gold  we  still  hold,  although  in  the  ordinary  course  of  commerce  we  may  rea- 
sonably export  some  of  it  before  long,  for  we  have  plenty  to  spare  and  money 
is  superabundant  at  two  per  cent,  on  call  in  Wall  Street.  Meanwhile  our  exports 
of  produce,  and  other  merchandise  continue  extremely  heavy,  and  they  were 
never  heavier  than  during  the  crisis,  that  is,  in  the  last  three  months  of  1907, 
while  in  January,  1908,  they  rose  to  a total  value  of  one  hundred  and  twenty- 
eight  millions,  or  $17,742,352  more  than  in^  January,  1907.  This  is  all  the  more 
favorable  because  our  imports  since  the  crisis  have  very  largely  decreased.  In 
our  January  exports,  cotton  alone  represented  $76,687,508  of  the  total,  and  bread- 
stuffs  $24,463,503. 

As  to  our  national  finances  and  the  defects  of  our  currency  system,  there  is 
much  that  calls  for  reform,  but  there  seems  to  be  little  or  no  prospect  at  this 
session  of  Congress  of  the  passage  of  a comprehensive  financial  measure,  although 
it  is  a remedy  we  need.  We  shall  therefore  have  to  rest  content  for  the  time 
being  with  the  much  amended  emergency  currency  measure,  familiar  to  us  as  the 
Aldrich  Bill.  This  provides  only  for  the  issue  of  a maximum  of  five  hundred 
millions  of  currency  by  the  government  to  the  national  banks,  to  ward  off  a 
panic  or  mitigate  its  effects,  the  banks  to  pay  six  per  cent,  interest  per  annum 
for  whatever  they  take  of  this  emergenc}/-  currency,  and  give  security  in  accept- 
able railway,  municipal  and  other  bonds  for  it  to  the  Treasury. 

So  far,  so  good.  I am,  therefore,  strongly  in  favor  of  the  Aldrich  measure, 
as  a panic  remedy,  naturally  so  as  I originated  the  fundamental  part  of  it.  It 
will  do  much  to  prevent  panics,  and  will  effectually  stop  the  hoarding  of  currency 
that  accompanies  them,  for  what  inducement  would  there  be  to  hoard  it  when 
a supply  of  five  hundred  millions  of  new  currency  would  be  open  to  the  banks? 
There  could  be  no  extreme  scarcity  of  money  then;  nothing  in  any  way  approach- 
ing the  stringency  that  not  only  New  York  but  the  whole  United  States  suffered 
under  in  the  last  three  months  of  1907. 

Yet  the  great  remedy,  the  comprehensive  financial  reform  measure  we  need 
will  be  ultimately  passed  by  Congress,  and  its  provisions  will  include  the  modi- 
fication of  the  Sub-Treasury ,^ystem,  which  has  always  been  a source  of  much 
mischief  through  locking  up  government  money  received  for  Customs  duties 
and  internal  revenue  taxes,  that  ought  to  be  kept  in  circulation.  The  proposi- 
tion, however,  to  establish  a central  national  bank  in  New  York,  or  anywhere 
else,  as  a substitute  for  it,  is  to  be  strongly  deprecated.  It  would  be  a rich 
plum  for  those  who  controlled  it  but  would  excite  the  jealously  and  hostility  of 
all  the  other  banks.  Moreover,  such  a bank  would  in  effect  be  a revival  of 
the  old  United  States  Bank,  against  which,  and  the  scandals  and  corruption  con- 
nected with  it,  President  Jackson  made  war  so  vigorously  as  to  force  it  into 
liquidation.  The  second  experiment  of  a United  States  bank  was  no  less  in- 
volved in  scandal  and  no  less  a failure  than  the  first,  and  in  each  case  there  was 
the  same  inglorious  end,  compulsory  liquidation.  Both,  too,  were  used  as  politi- 
cal machines,  and  guilty  of  favoritism  and  many  abuses  of  power,  and  a new 
central  bank  would  give  us  another  big  political  and  speculative  machine,  liable 
to  the  same  evils  and  objections.  Therefore  all  bankers  should  resolutely  oppose 
a central  bank.  It  would  not  be  a remedy  for  any  of  the  eyils  complained  of, 
butr  instead,  furnish  us  with  a new  complication. 

7 


While  we  can  hardly  expect  any  fundamental  chanp^es  in  our  currency  system 
at  present,  one  improvement  mipfht  easily  be  made  in  it  by  Conj^rcss  at  once, 
and  that  is  by  the  removal  of  restrictions  on  the  amount  of  national  bank  notes 
taken  out  or  canceled  per  month,  as  well  as  by  establishing  a bank  note  re- 
demption bureau  at  every  United  States  Sub-Treasury,  so  as  to  save  the  delay 
and  expense  of  sendinp:  to  and  from  the  Redemntion  Bureau  at  Washington., 
that  all  the  national  banks  are  now  subjected  to.  As  a minor  remedy  this  should 
be  urged  upon  Congress. 

Turning  to  the  Unitefl  States  bonds  pledged  with  the  Treasury  to  secure  the 
national  bank  notes,  we  all  know  that  they  are  as  good  as  gold,  if  not  better, 
but  still  they  are  evidences  of  debt,  and  it  is  a false  economic  principle  to  issue 
currency  on  such  a basis.  Moreover,  it  is  costly  for  the  government,  for  it 
practically  and  permanently  prevents  it,  in  the  interest  of  the  national  banks, 
from  redeeming  the  bonds  deposited  to  secure  national  bank  notes,  out  of  its 
surplus  income.  Still  it^  has  great  merit  in  givinor  us  a safe  and  sound  bank 
currency.  Ultimately  this  system,  born  of  the  civil  war,  will  be  superseded  by 
a better  one,  but  this  will  doubtless  be  done  in  a manner  which  will  not  interfere 
with  or  impair  vested  interests. 

Owing  to  the  short  time  now  left  of  this  session  of  Congress,  nothing  more 
than  the  “Aldrich”  bill  can  possibly  be  enacted  at  this  time.  Its  simplicity  is 
a recommendation  to  Congress.  But,  nevertheless.  Congress  should  later  pass 
a permanent  currency  bill,  a bill  which  will  settle  every  riuestion  as  to  the 

finances  of  the  nation,  at  once  and^  for  a century  to  come.  Such  a bill  is  pos- 

sible. and  in  fact  it  would  be  the  simplest  kind  of  measure  for  the  Government 
to  adopt  one  to  provide  for  just  the  kind  of  currency,  and  the  amount  of  cur- 
rency the  Ipisiness  of  the  nation,  the  banks,  and  the  people  should  have; 
one  to  provide  for  a perfectly  elastic  currency  without  creating  the  slightest  de- 
preciation of  money  or  danger  of  loss  to  banks  or  Government.  It  should  pro- 
vide a perfect  wav  of  obtaining  money  to  move  the  crops,  and  furnish  an  all 
.sufficient  means  of  preventing  or  breaking  panics.  It  should  make  the  money  of 

the^  United  States  still  more  current  and  acceptable  in  all  parts  of  the  world. 

This  would  m.ake  the  nation  greater  in  the  eyes  of  other  nations,  and  give  the 
United  States  Treasury  a proper  command  of  the  commerce  and  finances  of  the 
world,  within  ten  years  after  being  put  into  operation. 

All  the  Government  need  do  to  effect  such  change  in  the  finances  of  tlTe 
eountry,  and  to  acquire  all  such  advantages  for  the  Government  and  the  people, 
in  my  opinion,  is  to  wipe  out  the  whole  system  of  National  Bank  Currency,  and 
give  such  banks,  or  any  banks.  Government  currency  direct,  upon  the  same 
securities,  and  such  other  kinds  of  securities ' as  the  Government  is  willing  to 
accept  and  permit  the  banks  to  increase  or  diminish  the  amount  it  obtains  when- 
business  of  the  banks  requires  it:  every  bank  to  do  no  more  than  give 
sufficient  security  for  the  money.  The  Government  need  do  no  more  than  to 
take  the  security  and  hand  the  bank  the  money.  The  Government  should  be 
paid  for  the  use  of  the  money  a low  rate  of  interest,  say  one  per  cent.  No  bank 
should  be  required  to  pay  more. 

The  credit  of  the  Government  will  be  all  sufficient  for  the  credit  of  the 
currency,  and  every  dollar  of  it  would  be  perfectly  secured  by  the  security  given 
the  Government  for  it  by  the  banks.  The  issuing  of  the  money  by  the  Gov- 
ernment under  this  system  would  not  injure  the  credit  of  the  Government  in 
the  slightest  degree.  Banks  should  be  allowed  to  increase  or  diminish  the 
amount  of  money  they  obtain  in  amounts  which  can  be  decided  by  the  law. 
Such  a system  would  be  satisfactory  to  all  the  people,  except  the  national  banks 
These  banks  have  been  given  the  privilege  of  having  their  names  on  the  money 
they  issue  long  enough.  The  money  of  the  banks  has  ever  been  Government 
money.  The  Government  has  promised  to  pay  it  if  the  banks  did  not.  and 
has  had  the  means  of  paying.  Let  the  Government  do  as  it  should:  issue  all 
the  money.  Let  it  be  circulated  by  banks  whitli  give  proper  security  fnr  it 
Enlarge  the  means  of  securing  the  Government,  by  accepting  State  and  Municipal 
bonds,  or  even  Railroad  bonds,  to  the  extent  of  say  50  per  cent.,  and  Government 
bonds  for  the  other  50  per  cent. 

The  amount  of  additional  business  this  change  in  the  finances  of  the  country 
would  make  the  Government,  would  be  no  greater  than  any  other  change  woulcl 

g ' ' 


make,  and  would  be  much  less  than  what  will  be  necessary  if  the  present  bill 
before  the  Senate  is  passed.  All  the  great  work  and  expense  of  settling  up  the 
affairs  of  broken  national  banks  and  paying  oft'  their  notes  will  be  stopped. 

There  would  be  no  such  things  then  for  the  Government  to  settle.  The 
Treasury  can  be  required  by  the  law  to  keep  all  the  currency  issued  for  the 
purpose,  that  may  be  taken  up,  distinct  and  separate  from  all  treasury  receipts 
from  other  sources. 

The  severity  of  the  panic  ordeal  of  1907  that  the  New  York  banks  passed 
through  was  reflected  in  the  issue  to  them  by  the  New  York  Clearing  House,  on 
and  after  October  22d,  of,  in  all,  a hundred  millions  of  loan  certificates,  although 
the  largest  amount  of  these  outstanding  at  any  one  time  was  eighty-four  millions. 
This  form  of  banking  relief  is  purely  American  and  has  never  been  adopted  in 
Europe.  The  maximum  issue  of  Clearing  House  loan  certificates  in  the  panic  of 
1893  was  $41,690,000,  and  in  the  panic  of  1873  $26,565,000.  But  in  1893  New  York 
bank  deposits  were  only  $400,000,000;  in  1907  they  were  $1,050,000,000,  exclusive  of 
Trust  Companies.  The  maximum  of  certificates  in  1907  was  reached  in  the 
third  week  of  November,  but  the  Clearing  House  banks  showed  their  largest 
deficit  in  reserve — $54,100,000 — in  the  first  week  in  November.  Simultaneously 
the  loan  certificates  issued  by  the  Boston  Clearing  House  reached  their  largest 
aggregate,  $11,995,000.  It  is  noteworthy  also  that  three  powerful  New  York  banks 
then  held  one-third  of  all  the  loan  certificates  issued  by  the  New  York  Clear- 
ing House.  One  of  these  held  $13,500,000;  another  $10,000,000;  and  the  third  $7,- 
500,000.  The  obvious  object  of  this  was  to  enable  the  strong  banks  to  loan  a 
part  of  their  cash  reserves  to  weak  associates. 

The  Clearing  House  Committee  and  the  New  York  banks  individually  and 
collectively  did  splendid  work  in  mitigating  as  far  as  possible  the  effects  of  the 
panic,  while  the  Secretary  of  the  Treasury,  Mr.  Corteb'^ou,  rendered  very  valuable 
service  by  co-operating  with  the  national  banks  to  reduce  the  monetary  string- 
ency through  large  treasury  deposits  and  facilitatii^g  the.  importation  of  gold. 

Mr.  Morgan  and  several  other  private  bankers  also  rendered  praiseworthy 
service  during  the  panic,  and  my  firm  did  its  part  by  loanina:  to  the  members  of 
the  Stock  Exchange,  at  the  most  critical  period,  three  million  dollars  at  mod- 
erate rates  of  interest. 

The  New  York  Clearing  House  is  a non-incorporated  association,  but  its 
reserve  is  the  foundation  for  an  enormous  amount  of  the  country’s  commercial 
credit.  Of  course,  the  banks  and  others  holding  practically  unsalable  collateral 
for  loans,  that  the  borrowers  were  unable  to  repay,  were  forced  to  help  the 
borrowers  and  save  themselves  from  loss  by  continuing  to  hold  them  through 
the  crisis  for  a bettei;  market.  There  were  many  cases  of  this  kind,  particularly 
among  the  Trust  Companies,  and  there  has  been  much  slow  and  careful  after- 
panic liquidation  of  such  collateral,  and  much  of  it  has  still  to  be  done.  It  is, 
however,  being  facilitated  by  the  decided  improvement  that  has  taken  place  in 
the  market  for  first-class  bonds. 

Capitalists  who  for  the  past  two  or  three  years  had  been  dissatisfied  with 
the  returns  of  ordinary  investments  and  who  had  gone  into  hazardous  specu- 
lations and  extensive  underwriting  of  new  bond  issues  in  the  hope  of  large  and 
quick  profits,  have  been  sobered  by  their  heavy  losses  and  are  now  seeking  safety 
in  prime  investment  bonds. 

Had  the  market  for  bonds  not  improved  as  it  has,  it  would  have  been  prac- 
tically impossible  for  the  New  York  Central  and  other  Railway  Companies  to 
have  marketed  the  large  amount  of  notes  they  have  succeeded  in  selling  since  the 
beginning  of  this  year.  The'after  effects  of  the  panic,  as  well  as  the  panic  itself,  • 
would  also  have  been  far  worse  than  anything  we  have  witnessed  had  it  not 
been  for  the  previous  heavy  stock  market  liquidation,  a liquidation  that  in  many 
cases  had  been  practically  continuous  from  the  end  of  1906,  and  that  was  most 
drastic  and  disastrous  in  August,  1907. 

That  the  banking  situation  has  become  normal  is  indicated  by  the  elimination 
of  loai]  certificates  and  the  resumption  of  normal  methods  by  all  the  Clear- 
mg  Houses  in  the  United  States,  and  particularly  by  the  resumption  of  the 
weekly  detailed  bank  statements  by  the  New  York  Clearing  House.  This  oc- 
curred on  Eebniary  8th  for  the  first  time  after  their  suspension  on  October  26, 
1907,  and  was  supplemented  by  statements  of  the  pon-a^aring  House  banks  and 


Trust  Companies,  including  actual  as  well  as  average  conditions.  This  last  is  a 
new  and  commendable  feature,  which  every  Saturday  will  enable  us  to  learn 
how  al  the  banking  institutions  in  New  York  City  and  its  several  boroughs  stand, 
both  individually  and  collectively,  in  their  average  and  their  actual  condition. 

That  we  are  assured  of  a sui^erabundance  of  money  at  low  rates  of  interest 
is  evident  from  the  large  and  growing  accumulations  of  surplus  funds  in  the 
banks  from  Maine  to  California,  and  the  light  demand.  All  the  indications  favor 
a jirotracted  ])criod  of  e.xtrcme  ease  in  the  money  market,  modified  only  by  gold 
exports  and  the  withdrawal  by  the  Government,  from  time  to  time,  of  some  and 
jirobably  a large  part  of  its  deposits  in  national  banks.  This  again  feminds  us 
that  the  Sub-Treasury  system  makes  the  Government  an  unlimited  hoarder  of 
money,  with  only  evil  results.  This,  alone,  calls  for  its  modification. 

JUit  while  the  large  aggregate  of  the  surplus  funds  of  the  banks  testifies  to 
the  return  of  confidence,  and  with  it  the  return  to  banking  channels  of  hoarded- 
money,  it  also  reflects  the  dullness  of  trade  and  much  idle  machinery  and  unem- 
ployed labor.  Hence  the  bank  clearings  of  the  United  States  in  January  were 
twentj'-five  ))er  cent,  less  than  in  January;  1907.  This  condition  of  affairs  has, 
been  and  still  is  severely  felt  by  the  Railways,  whose  largely  reduced  gross 
and  net  earnings  and  long  lines  of  empty  cars  tell  why  a number  of  them,  like 
many  industrial  corporations,  have  reduced  or  passed  their  dividends,  or  paid 
them  in  scrip.  IMore  railway  and  industrial  corporations  will'  probably  have  to 
accommodate  themselves  to  circumstances  and  do  likewise  in  conseciuence  of  re- 
duced earnings.  That  we  expect,  and  are  prepared  for,  while  the  trade  de- 
pression lasts,  and  hence  we  all  hope  and  trust  it  will  be  short. 

Meanwhile  we  cannot  ignore  the  political  situation  in  this  Presidential  year, 
and  the  disturbing  and  depressing  effect  of  the  last  message  of  President 
Roosevelt  to  Congress,  with  its  onslaught  on  Wall  Street,  followed  by  the  un- 
just bitter  attack  of  Mr.  Bryan  on  Stock  Exchange  speculation,  which  he  de- 
nounced as  gambling.  Wall  Street  was  thus  ground  between  the  upper  and 
nether  millstones  of  the  Republican  and  the  Democratic  parties;  it  was  fired  on 
from  both  sides  with  hot  shot,  grape  and  canister,  without  any  good  reason. 

Speculation  in  stocks,  as  conducted  through  Stock  Exchange  brokers,  is  no 
more  gambling  than  speculation  in  real  estate  or  ordinary  merchandise.  All 
trade  is  more  or  less  speculative  because  it  involves  risks.  If  it  did  not  in- 
volve risk  there  would  not  be  so  many  mercantile  failures  as  there  are  .every 
year,  yet  no  one  calls  trade  gambling.  Every  time  a merchant  buys  a line  of 
goods,  he  makes  a venture,  not  knowing  whether  they  will  rise  or  depreciate 
in  market  value  on  his  hancE.  He  buys  also  on  credit,  just  as  he  gives  credit  to 
his  customers;  and  what  is  the  difference  in  principle  between  this  form  of 
credit  and  the  credit  a stock  broker  gives  his  customers  who  pay  ten  per  cent,  on 
the  par  value  of  their  purchases  while  the  broker  provides  the  balance  and  holds 
the  stocks  as  security?  This  is  the  margin,  which  is  a credit  in  the  account  of 
each  of  them;  and  I call  it  a credit  instead  of  a margin,  which  is  a better  word 
for  brokers  to  use. 

President  Roosevelt  condemns  “options”  very  vigorously,  as  if  they  were 
now  dealt  in  on  the  Stock  Exchange,  as  they  once  were,  ranging  from  three  to 
sixty  days;  but  they  have  not  been  traded  in  there  for  many  years,  all  purchases 
and  sales  of  stock  being  deliverable  and  receivable  on  the  day  following  the  trans- 
actions on  the  floor  of  the  Exchahge,  except  those  specifically  for  “cash,”  which 
means,  to  be  delivered  and  received  the  same  day.  But  on  the  Cotton,  Produce  and 
Coffee  Exchanges,  and  Chicago  Board  of  Trade,  nearly  all  the  transactions  are  in 
“futures” — and  these  are  a boon  to  cotton  and  grain  growers  and  coffee  import- 
ers, who,  through  them,  can  sell  their  growing  crops  and  importations  months 
before  they  actually  possess  and  are  ready  to  deliver  them,  so  in  advance  making- 
sure  of  the  prices  they  will  get  for  their  farm  products  and  importations. 

This  is  speculation,  yet  perfectly  legitimate,  and  I think  that  if  President 
Roosevelt  and  IMr.  Bryan  knew  more  about  these  markets  and  the  N.  Y.  Stock 
Exchange  from  actual  experience,  they  would  see  the  injustice  of  much  that  they 
have  said  in  decrying  the  evils  of  speculation.  Black  sheep  and  exceptional 
wrongdoing  should  not  be  held  up  as  examples  of  all  and  everything  in  Wall 
Street;  and  because  unscrupulous  men  sometimes  embezzle  in  order  to  get  money 
to  speculate  with,  Wall  Street  should  not  be  held  responsible  for  their  crime, 

10 


any  more  than  a river  should  be  blamed  for  a man’s  suicide  because  he  jumps  into 
, it  to  end  his  troubles.  There  is  nothing  illegal  or  against  public  v/elfare  in  a 
broker  buying  and  selling  stocks  and  bonds  for  his  customers  in  conformity  with 
the  rules  of  the  N.  Y.  Stock  Exchanges,  nor  can  there  ever  be;  and  I know  that 
such  business  is*  just  as  honorable  and  legitimate  as  the  buying  and  selling 
of  iron,  dry  goods  or  real  estate  on  credit.  It  is  credit  that  keeps  alive  the 
business  world. 

The  attacks  on  the  financial  center  of  this  country  are  indiscriminate,  and  I 
am  sorry  that  President  Roosevelt,  who  has  done  so  much  good  in  other  respects, 
should  have  nipped  the  bud  of  reviving  confidence  in  the  Stock  market  in  the 
way  he  did,  for  his  denunciation  of  Wall  Street,  coupled  with  Mr.  Bryan’s  whole- 
sale and  wild  condemnation  of  the  Stock  Exchange,  led  to  a renewal  of  liquida- 
tion in  the  stock  market,  and  a fresh  decline  in  prices  through  creating  fresh 
distrust  of  their  holdings  among  investors. 

The  New  York  Stock  Exchange  is  a great  national  and  international  market, 
and  its  i,ioo  members  compose  a very  honorable  and  w^ealthy  body  of  men,  whose 
integrity  in  all  their  business  transactions  is  unquestioned.  They  are  bound  not 
only  by  the  rules  of  the  Stock  Exchange  to  be  absolutely  honorable  and  strictly 
honest  in  their  dealings,  but  their  own  interests  and  their  relations  with  their 
fellow  members  and  their  customers  compel  them  to  be  so,  and  to  be  also  above 
suspicion.  Summary  punishment,  even  to  expulsion  from  membership,  would  fol- 
low any  dishonorable  or  dishonest  act  on  the  part  of  any  of  them,  and  such 
instances  are  of  extremely  rare  occurrence.  It  is  therefore  unjust  to  stigma- 
tize these  men,  these  bankers  and  brokers  of  good  business  standing  and  good 
social  position,  in  the  manner  they  have  been  stigmatized  recently  by  Mr.  Bryan; 
and  again  I think  that  if  he  knew  Wall  Street  better  than  he  does  he  would 
have  been  more  discriminating,  and  would  have  confined  his  severest  criticism  to 
the  speculative  capitalists  who  have  probably  at  times  abused  the  Stock  Ex- 
change by  the  manipulation  of  stocks. 

The  so-called  practice  of  “washing”  is  stictly  prohibited  by  the  rules  of  the 
Stock  Exchange,  but  as  it  is  very  hard  to  detect  and  prove,  in  some  instances, 
doubtless  it  may  have  gone  unpunished.  The  Stock  Exchange,  however,  earnestly 
endeavors  to  ferret  out  and  prevent  and  severely  punish  all  violations  of  its  rules. 

After  every  great  panic,  the  Stock  Exchange  has  been  made  a scape-goat,  and 
unjustly  assailed  as  the  main  cause  of  the  trouble.  The  fact,  how'ever,  that  the 
two  great  opposing  forces  in  national  politics  are  now  united  in  their  attacks  upon 
Wall  Street  is  unusual,  and  forshadows  more  attacks  of  the  same  disturbing  char- 
acter during  the  presidential  campaign.  This  is  a depressing  factor  in  both  the 
financial  and  trade  situation,  and  we  see  evidence  of  it  in  all  directions.  It  is,  of 
course,  a factor  that  retards  recovery  from  the  crisis  by  retarding  the  growth 
of  confidence,  and  how  far  its  influence  will  extend  we  have  yet  to  see.  But 
of  one  thing  we  may  be  sure,  and  that  is,  we  shall  be  reminded  of  it  very  forcibly 
from  time  to  time  from  the  batteries  on  both  sides  of  the  political  battle  ground 
until  after  the  November  election;  then  the  guns  will  cease  to  belch  their  thunder. 
Hence  we  must  be  prepared  for  it  in  the  interval  and  make  the  best  of  it,  re- 
membering the  old  adage — “Forewarned,  Forearmed.”  But  never  before  has  pol- 
itics hurled  its  javelins  so  fiercely  against  Wall  Street,  and  that  practically  means 
all  the  Stock  Exchanges  in  the  country.  The  joint  attack  is  against 
stock  speculation,  and  no  Stock  Exchange  in  the  world  ever  was  or 
ever  can  be  free  from  that.  It  would  obviously  be  absolutely  impossible  to  dis- 
tinguish investment  from  speculative  transactions  on  the  floor  of  the  Stock  Ex- 
change, or  tell  whether  long  or  short  stock  was  being  bought  and  sold.  Because 
speculative  capitalists  in  control  of  large  corporations  have  managed  them  dis- 
honestly for  their  own  benefit,  and  in  furthering  their  schemes  and  speculations 
employed  stock  brokers  and  used  the  Stock  Exchange,  it  and  its  members  should 
not  be  held  responsible  for  the  wrongdoing  of  these  men,  as  it  is  a market  open 
to  all  the  world,  just  as  is  the  London  Stock  Exchange  or  any  Bourse  in  Con- 
tinental Europe.  To  restrict  its  scope  and  operations  by  law  would  be  to  lessen 
its  usefulness  to  investors  and  corporations  issuing  securities,  and  destroy  its 
utility  as  a free  market  for  all. 

Wall  Street  being  not  only  a local  but  a national  and  international  financial 
center,  the  whole  world,  not  only  the  whole  country,  is  tributary  to  it,  and  it  is 

II 


indispensable  to  tlie  whole  country.  Yet  it  is  made  the  target  at  present  for  all 
sorts  of  political  abn«c,  and  various  schemes  have  been  urged  for  suppressing' 
trading  in  stocks,  all  of  which  are  of  course  chimerical,  for  as  long  as  we  have 
securities,  there  must,  in  justice  to  the  millions  of  holders,  be  a market  for  them. 
Without  it  there  would  be  a sort  of  chaos  of  confusion  and  abnormal  prices,  for 
it  is  the  speculator  who  is  often  the  most  keen  and  discriminating  in  judging  the 
true  value  of  securities.  The  much  maligned  “bear”  is  the  safety  valve  of  the. 
market.  He  often  prevents  the  manipulation  of  the  price  of  a stock  to  an  unfairly 
high  figure  by  exposing  the  weak  points  in  the  situation,  which  is  a protection  to 
a prospective  buyer. 

A great  deal  of  shallow  abuse  is  still  showered  on  the  Stock  Exchange 
from  all  parts  of  the  country.  This  always  follows  a panic.  It  pleases  a cer- 
tain class  of  ignorant  and  misguided  people  to  hear  Wall  Street  denounced  and 
maligned  on  every  opportunity.  It  matters  little  whether  the  accusations  arc 
right  or  wrong.  So  pessimistic  is  public  opinion  that  the  worse  the  charges  the 
more  numerous  the  believers.  No  one  looks  on  the  other  side;  no  one  is  told  of 
the  manifold  services  and  advantages-  of  Wall  Street  as  a financial 
center.  No  one  is  taught  that  Wall  Street  is  merely  a central  market 
for  capital,  just  as  Chicago  is  for  wheat,  Boston  for  wool.  New  Orleans  for 
cotton,  etc.  How  many  appreciate  the  fact  that  Wall  Street  is  as  essential  to  the 
business  life  of  the  country  as  is  the  Legislature  at  Washington  to  our  political 
life?  How  man}'-  realize  that  Wall  Street  is  the  primary  nerve  center  of  the 
American  business  world;  that  a blow  struck  there  is  an  injury  to  the  whole  finan- 
cial and  business  fabric  of  the  nation?  How  many  forget  that  in  Wall  Street 
the  investor  can  deal  with  greater  advantage  to  himself,  as  a rule,  than  in  any 
other  financial  market?  How  many  understand  that  there  the  country  can  best 
settle  its  accounts;  send  its  savings,  and  make  its  investments  more  readily  and  on 
better  terms  than  anywhere  else?  The  very  individuals  who  most  violently  abuse 
Wall  Street  are  often  among  the  first  to  go  there  for  financing  new  enterprises  or 
to  pick  up  cheap  investments.  Thither,  also,  these  same  grumblers  hasten  in 
order  to  “get  rich  quickly.”  When  they  succeed  nothing  is  heard  about  the 
“wickedness”  of  Wall  Street,  and  they  flatter  themselves  as  to  their  own  superior 
shrewdness.  But  when  these  same  individuals  lose,  then  Wall  Street  is  nothing 
but  a “gambling  hell  and  a cesspool  of  iniquity.”  They  fail  to  recognize  that 
their  losses  are  the  result  of  their  own  cupidity,  or  inability  to  discriminate  be- 
tween sound  and  unsound  investments.  They  usually  lose  because  of  their  own 
bad  judgment;  but  nevertheless,  there  is  no  end  to  their  objurgations. 

Now  Wall  Street  after  all  is  little  difterent  from  any  other  department  of 
business  and  industry.  Its  make-up  naturally  includes  men  with  similar  failings 
and  similar  impulses  to  good  and  evil  that  exist  everywhere;  men  who  are  bet- 
ter than  the  politicians  who  make  capital  by  abusing  Wall  Street;  men  who  are 
better  than  some  of  the  trusts  or  the  unions  which  aim  to  selfishly  and  often 
relentlessly  grasp  all  within  their  power.  It  may  also  include  a very  few  who  un- 
scrupulously manipulate  property  for  their  own  advantage  and  at  every  opportun- 
ity. But  it  also  includes  a vast  majority  of  men  of  high  principles,  of  great 
foresight  and  of  enlightened  self-interest;  men  who  recognize  that  their  own  wel- 
fare is  dependent  upon  their  regard  for  the  welfare  of  others.  Most  of  such  men 
are  rarely  heard  of,  and  their  good  deeds  and  honorable  achievements  are  not 
exploited  in  the  daily  press,  which  is  naturally  interested  in  the  search  for  the 
abnormal.  Wall  Street  probably  contains  a much  larger  percentage  of  strong 
brainy  men  than  any  other  community,  because  right  there  centers  the  manage- 
ment of  large  affairs  and  great  organizations  which  demand  the  highest  ability. 
True,  Wall  Street  attracts  some  men  of  unscrupulous  and  predatory  instincts 
because  of  the  great  opportunities  for  accumulating  wealth  by  devious  and  often 
improper  methods.  The  occasional  flotation  of  questionable  schemes  and  the  im- 
proper use  of  funds  held  in  trust  undoubtedly  are  sometimes  among  the  greatest 
evils  connected  wnth  Wall  Street.  They  are  evils  that  its  best  men  are  most 
anxious  to  see  eliminated,  and  it  is  satisfactory  to  know  that  strong  efforts  are 
being  made  in  this  direction.  It  cannot  be  too  strongly  stated  that  many  of  the 
abuses  which  aggravated  the  late  panic  could  not  be  repeated,  and  have  been 
stopped  forever.  Whatever  defects  remain,  the  business  standards  of  Wall  Street 
are  upon  a distinctly  higher  plane  than  existed  some  time  ago.  In  spite  of  troubles 


12 


and  pessimism  the  world  is  growing  better  and  better.  But  so  long  as  fools  with 
money  are  to  be  found,  just  so  long  will  there  be  sharpers  ready  to  take  the 
one  and  leave  the  other.  It  is  useless  to  expect  the  millennium.  Human  nature 
changes  slowly,  and  the  only  means  of  checking  abuses  is  to  establish  rules  and 
standards  of  a high  order,  and  to  keep  alive  a public  opinion  that  will  insist  upon 
their  enforcement.  An  alert  and  vigorous  public  opinion  is  often  more  effective 
in  preventing  evil,  than  the  punitive  measures  which  are  applied  after  the  wrong 
has  been  done. 

Possibly  there  are  a few  abuses  undiscovered  on  the  Stock  Exchange  that 
should  be  remedied.  Nevertheless,  I affirm  without  fear  of  contradiction  that 
there  is  no  business  institution  in  the  United  States  where  standards  are  as  high 
or  where  the  integrity  of  its  members  is  equal  to  that  prevailing  on  the  Stock  Ex- 
change. Therefore,  let  the  people  and  our  Legislatures  come  to  their  senses,  and 
awake  to  the  fact  that  in  striking  at  the  financial  district  they  are  hurting  them- 
selves quite  as  much  as  those  whom  they  seek  to  destroy,  and  that  the  evil  trans- 
actions are  small  in  comparison  with  the  good.  Let  them  understand  that  in 
fomenting  discontent  of  this  sort  they  are  intensifying  the  general  depression,' 
adding  to  the  number  of  unemployed,  driving  capital  into  hiding  and  generally 
interfering  with  that  recover}^  in  commerce  and  industry  which  is  now  so  earnest- 
ly desired.  The  present  antipathy  to  Wall  Street  savors  largely  of  public  hys- 
teria, bogyphobia  and  political  dementia.  Apparently,  it  is  a disease  which  must 
run  its  course;  if  so,  the  best  cure  will  be  a period  of  reflection  in  which  to  culti- 
vate calmer  and  more  rational  views. 

At  the  same  time  that  Wall  Street  is  being  riddled  with  hot  shot,  the  rail- 
ways are  being  harassed  by  State  legislation,  involving  low  rates,  and  projects 
are  on  foot  that  in  effect  would  prevent  their  development  to  meet  the  wants 
of  the  people.  All  this  is  oppressive  and  inimical  to  the  national  welfare,  and 
I advocate  as  a remedy  removing  the  interstate  railways  from  the  control  of  the 
States,  and  placing  them  entirely  under  the  control  of  the  United  States  Govern- 
ment. This  Congress  can  and  should  do  promptly. 

Another  great  difficulty  the  railways  and  other  large  employers  of  labor  now 
have  to  contend  with  is  the  refusal  or  unwillingness  of  the  Labor  Unions  to 
consent  to  a reduction  of  wages  to  meet  reduced  earnings.  A lowering  of  wages 
has  become  absolutely  necessary,  for  they  are  still  at  the  high  figures  to  which 
they  were  pushed  during  the  long  period  of  prosperity.  They  are  at  a boom 
level  that  railway  and  manufacturing  corporations  cannot  afford  to  pay  in  these 
altered  times.  The  Labor  Unions  should  recognize  this  at  once,  and  reduce  their 
wage  scales,  and  not  wait  until  they  are  forced  to  yield.  Moreover,  they  should 
see  that  with  reduced  wages  a larger  number  of  men  could  be  profitably  em- 
ployed than  is  possible  with  wages  as  they  are,  and  in  this  way  the  ranks  of  the 
unemployed  would  be  reduced.  This  of  itself  would  be  of  great  benefit  to  both 
the  working  men  and  their  employers,  as  well  as  to  the  country  at  large.  It  is  a 
time  when  common  sense  should  be  brought  into  play  in  the  adjustment  of  means 
to  ends  in  wages  as  well  as  other  matters,  for  the  more  it  is  the  quicker  will 
be  recovery  from  the  effects  of  the  panic,  and  the  less  will  be  the  suffering  from 
industrial  depression  by  labor  as  well  as  capital.  This  in  the  concrete  means  that 
it  would  result  in  there  being  fewer  workmen  in  actual  want,  and  fewer  corpora- 
tions going  to  the  wall.  It  is  one  of  the  great  remedies  that  the  situation  now 
calls  for. 

A general  reduction  of  wages  would  to  almost  a certainty  cause  some  mills 
that  have  closed  to  reopen,  and  cause  others  that  are  running  on  part  time  to  run 
on  full  time.  The  advent  of  Spring  will  of  course  tend  to  stimulate  recovery,  so 
we  shall  have  the  help  of  Nature  to  repair  damages.  With  Nature  as  an  ally, 
we  ought  to  rapidly  overcome  all  obstacles  in  the  way  of  complete  recuperation. 

Readjustment  of  existing  conditions  is  the  order  of  the  day,  and  where  there’s 
a will  there’s  a way,  as  we  all  know.  The  general  reduction  that  has  taken  place 
in  the  price  of  commodities,  and  to  some  extent  in  rents,  furnishes  a very  good 
reason  of  itself  why  wages  should  be  reduced  from  the  high  points  to  which 
they  climbed  to  meet  high  prices.  As  it  is,  the  inequality  between  wages  and 
prices  is  very  conspicuous,  and  equality  should  be  restored  as  quickly  as  possible. 
Equality  is  another  name  for  justice.  It  is  also  the  touchstone  of  taxation. 
Workmen  should  not  forget  that  even  half  a loaf  is  better  than  no  bread,  and 

13 


that  by  accepting?  reduced  wages  they  are  paving  the  way  to  better  times  for 
themselves  as  well  as  for  the  country.  Then,  too,  they  owe  a duty  to  society  at' 
large.  No  one  should  be  governed  by  the  narrow,  selfish  policy  of  living  for  him- 
self alone.  This  is  a world  in  which  we  must  give  and  take,  and  labor  and 
capital  have  mutual  interests. 

The  decline  in  commodity  prices,  tliat  were  before  excessive,  has  been 
salutary  and  of  vast  benefit  in  bringing  the  necessaries' of  life  within  easier  reach 
of  the  wage-earning  masses,  and  in  preventing  many  industries  from  going  from 
bad  to  worse,  through  cheapening  their  supplies  of  raw  material.  The  people 
generally,  as  consumers,  benefit  by  this  reduction  in  the  cost  of  production,  and 
in  turn  it  tends  to  increase  consumption  and  quicken  trade  and  manufacturing  en- 
terprise. All  these  influences,  too,  tend  to  strengthen  confidence  in  tl*e  situation 
and  hope  for  the  future.  But  the  over-trading,  extravagance  and  excessive  spec- 
ulation that  primarily  led  to  the  panic  should  be  carefully  guarded  against  in  the 
future. 

The  very  severe  and  extensive  liquidation  that  we  have  witnessed,  not  only 
in  Wall  Street  but  all  over  the  country,  has  made  the  financial  situation  sounder 
and  therefore  safer  than  it  has  been  for  several  years,  for  it  must  be  confessed 
that  many  of  our  speculative  captains  of  industry  and  finance  passed  far  beyond 
the  bounds  of  conservatism  in  their  operations,  and  invited  the  crisis  'we  ex- 
perienced by  their  reckless  assumption  of  inordinate  risks  and  liabilities. 

It  was  a fitting  retribution  when  some  of  them  were  engulfed  by  it.  Es- 
pecially culpable  and  dangerous  to  the  public  were  those  speculative  capitalists 
who  sought  and  gained  control  of  chains  of  important  national  banks,  and  then 
used  their  resources  to  extend  their  own  hazardous  speculative  schemes.  These 
men  were  really  the  immediate  cause  of  the  crisis,  and  they  are  now  deservedly 
paying  the  penalty  for  it.  But  this  is  a small  consideration  in  comparison  with 
the  enormous  amount  of  havoc  they  created.  One  good  thing,  however,  has 
come  out  of  so  much  evil,  and  that  is  improvement  in  our  banking  conditions,  by 
the  exposure  and  eradication  of  this  unsound  banking  that  prevailed  in  New 
York,  and  to  some  extent  elsewhere. 

We  shall,  in  this  generation  at  least,  have  no  more  such  speculators  stepping 
into  control  of  large  New  York  banks  and  using  them  pretty  much  as  if  they, 
their  assets  and  deposits,  were  their  own  property.  Those  responsible  for  this 
unsound  banking  were  public  enemies,  and  we  are  still  feeling  the  effects  of 
their  reckless  and  illegal  proceedings.  The  fact  that  several  of  them  are  now 
under  indictment  for  their  oft’cnces  is  a reminder  that  the  way  of  the  transgressor 
is  hard.  Their  elimination  from  the  banking  -world  removed  a source  of  great 
danger,  which  might,  if  allowed  to  continue  longer,  have  resulted  in  a far  worse 
state  of  things  than  they  actually  created  before  their  career  was  brought  to 
a close. 

A salutary  effect  of  the  panic  is  the  check  it  has  given  to  extravagance  and 
waste  in  living  expenses,  and  the  practical  lesson  in  economy  that  it  has  taught 
very  many,  for  economy  is  wealth.  To  reduce  expenses  after  business  reverses  is 
the  best  way  to  recuperate,  and  a little  adversity  is  not  without  its  uses  among  us, 
for  we  are  be3^ond  question  the  most  extravagant  people  in  the  world.  This  ex- 
travagance in  living  has  been  the  prime  cause  of  much  of  the  “graft”  evil  that 
has  lowered  the  tone  of  our  business  and  political  life,  to  say  nothing  of  abuses 
of  power,  embezzlements,  corporation-looting,  and  other  forms  of  dishonesty. 

President  Roosevelt  in  his  war  againt  illegal  and  dishonest  corporate  prac- 
tices has  certainl>^  worked  for  the  good  of  the  country  and  to  raise  the  standard 
of  business  morality;  and  the  life  insurance,  railway  and  other  corporate  scandals 
that  we  are  all  familiar  with  have  shown  how  much  reform  and  purification  were 
needed  even  in  high  places.  Let  us  never  forget,  as  the  Bible  tells  us,  that 
“Righteousness  exalteth  a nation”  however  great  may  be  its  material  prosperity. 

That  there  is  a ver>^  large  amount  of  money  lying  idle  and  available  for 
investment  in  first-class  bonds,  was  conspicuously  shown  by  the  result  of  the 
sale  by  the  City  of  New  York  on  February  14th  of  fifty  millions  of  four  and  a 
half  per  cent,  bonds  when  three  hundred  millions  were  bid  for,  at  an  average 
price  of  about  104^.  This  oversubscription  of  six  times  the  amount  offered 
came  from  people,  who  would  not  have  touched  any  but  gilt-edged  securities. 

Of  course,  B' ' present  cheapness  of  money  accounts  for  much  of  this  large 

14 


New  York  subscription,  as  apart  from  investors,  banks  and  bankers  are  seeking’ 
safe  employment  for  their  surplus,  in  securities  that  can  be  promptly  marketed  on 
the  Stock  Exchange  whenever  necessary.  The  latter  is  an  indispensable  condi- 
tion with  them,  particularly  now  m view  of  the  national  banks  being  enormously 
indebted  to  the  Government  in  the  shape  of  Treasury  deposits,  and  also  in  view  of 
the  future  needs  of  the  government  calling  for  their  return.  This  is  already  giv- 
ing a hardening  tendency  to  time  money.  ... 

Although  trade  is  largely  prostrated  through  inactivity,  it  is  safe  to  say< 
notwithstanding  what  is  bad  in  the  situation,  that  fundamental  conditions  are 
generally  sound,  and  therefore  recovery  while  gradual  will,  be  the  easier  for  it. 
Meanwhile  with  inactivity  forced  upon  us,  let  us  be  masterly  in-  our  inactivity,  and 
make  a virtue  of  necessity.  There  is  much  in  knowing  when  to  stop  and  when  to 
go  ahead;  when  to  ’bout  ship  and  when  to  take  in  sail,  and  double  reef  the 
mainsail  and  the  topsails,  or  heave  to,  and  when  to  sail  under  bare  poles  or  a 
full  spread  of  canvas.  Skillful  navigation  is  necessary  to  success.  _ ^ 

With  regard  to  bank  reserves,  it  is  especially  important  during  this  period 
of  depression  that  they  should  be  kept  exceptionally  strong  and  as  much  as  pos- 
sible, within  reasonable  limits,  above  the  required  percentage.  Twenty-five  per 
cent,  of  reserve  against  deposits  in  the  central  reserve  cities,  and  especially  in 
New  York,  is  not  always  sufficient,  as  we  have  seen,  from  time  to  time,  to  enable 
the  banks  there  to  weather  a storm. 

The  Bank  of  England  maintains  an  average  reserve  of  nearly  twenty-five  per 
cent,  larger  tlran  that;  and  it  is  guarded  from  suspension  in  times  of  panic  by  a 
suspension  of  the  bank  act  by  the  government,  which  allows  it  to  issue  its  notes 
ad  libitum  without  any  compulsory  reserve.  Here  are  two  elements  of  safety. 
The  stronger  in  reserve  the  banks  keep  themselves,  the  more  confidence  in  them 
and  in  the  situation  will  be  strengthened,  and  the  stronger  confidence  becomes, 
the  more  enterprise  can  build  upon  it.  So  the  banks  by  their  conservatism  should 
do  all  they  can  to  encourage  confidence  as  the  prime  requisite  in  recuperation. 

The  New  York  banks,  holding  as  they  do  largely  the  reserves  of  other  banks 
throughout  the  country,  should  hold  a reserve  nearer  to  that  of  the  Bank  of 
England,  which  is  also  the  depository  of  the  reserve  of  other  banks,  but  in  a 
much  larger  proportion.  If  the  New  York  banks  had  held  30  per  cent,  reserve 
last  October,  when  the  Knickerbocker  Trust  Company  failed,  there  might  have 
been  no  necessity  for  issuing  Clearing  House  certificates,  and  in  that  case  there 
would  have  been  no  hoarding  of  money  and  little  or  no  panic.  But  the  banks 
are  naturally  desirous  of  making  money  by  keeping  their  loans  and  discounts  at 
high  figures,  so  they  are  apt  to  look  .upon  reserves  above  the  legal  limit  as 
money  wasted.  The  legal  limit,  however,  is  too  low  in  the  central  reserve  cities. 
My  remedv  is  to  raise  it.  It  ought,  in  my  opinion,  to  be  at  least  thirty  per  cent, 

instead  of  twenty-five  per  cent.,  and  apart  from  any  legal  requirements, 

the  New  York  Clearing  House  should  adopt  a rule  requiring  the 

banks  in  the  Association  to  keep  a reserve  of  30  per  cent.  The  banks  would 

lose  a little  in  profits  by  this  change,  but  they  would  gain  in  safety,  and  reduce 

our  liability  to  panics.  Their  experience  during  the  crisis,  when  for  ten  weeks, 

until  the  end  of  December,  currency  loaned  at  a premium  ranging  from  two  per 
cent,  to  five  per  cent.,  should  make  them  anxious  to  avoid  another  such  ordeal, 

and  an  ounce  of  prevention  is  better  than  a pound  of  cure. 

One  unpleasant  part  of  the  aftermath  of  the  panic  in  New  York  was  the 
failure  in  one  week,  at  the  end  of  January,  notwithstanding  that  they  held  five 
millions  of  loan  certificates,  of  four  banks  belonging  to  the  Clearing  House,  be- 
cause of  runs  on  their  deposits,  and  the  refusal  of  the  Clearing  Ilouse  to  give 
them  further  assistance.  Whether  or  not  any  of  these  will  be  able  to  resume  is 
still  undetermined.  Yet,  in  sharp  contrast  with  the  excitement  and  alarm  that 
prevailed  for  weeks  after  the  Knickerbocker  Trust  Company  failed,  the  public  re- 
garded these  failures  with  apathy,  and  the  recovery  in  the  stock  market  which  was 
then  in  progress,  chiefly  under  the  covering , of  short  contracts,  was  not  even 
checked  by  it,  so  mtich  had  sentiment  changed  in  the  interval.  These  failures 
had  been  practically  discounted,  large  as  they  were,  by  what  had  gone  before, 
incliuling  the  decline  in  stocks.  Yet  collectively  they  had  more  than  twenty-one 
thousand  depositors.  These  may  eventually  be  paid  in  full,  but  it  is  very  uncer- 
tfiin  when  that  will  be,  for  th^  law  is  a slow  coach,  especially  when  a permanent 


rcccivcrsliip  is  fastened  upon  a hank,  larj^ely  owing  to  the  long  wait  usually  neces- 
sary for  the  conversion  of  slow  assets  into  cash.  Moreover,  the  expenses  of  liqui- 
dation cat  up  a large  part  of  the  assets  under  the  system  of  fees  for  receivers 
and  their  counsel,  which  have  always  been  much  too  large  for  the  work  done, 
and  conscciucntly  they  involve  injustice  to  the  creditors.  Laws  should  therefore 
he  passed  suhstituting  for  fees  fixed  rates  of  compensation,  per  diem,  for  hoth  of 
these,  that  is  salaries;  and  meanwhile  the  courts  should,  under  the  existing  laws, 
reduce  their  fees  to  reasonable  amounts,  and  so  correct  this  evil  of  extravagance 
in  the  cost  of  liquidation,  which  in  some  instances  has  been  so  excessive  as  .to 
practically  amount  to  robbery  of  the  victims.  This  is  a needed  remedy  that 
should  he  urged  upon  State  legislatures. 

Two  of  these  failed  banks  are  expected  to  resume  within  six  months,  while 
the  other  two  will  he  wound  up,  and  probably  pay  depositors  forty  per  cent,  or 
fifty  per  cent,  of  their  claims  within  about  that  length  of  time. 

Very  fortunately,  however,  the  crisis  of  fQ07  was  much  less  prolific  of  bank 
failures  than  that  of  either  1873  or  1893.  In  1^3  no  fewer  than  one  hundred  and 
fifty-eight  banks  suspended,  and  of  these  sixty-five  went  into  permanent  receiver- 
ships, while  eighty-six  resumed  within  the.  year,  and  seven  later.  But  few  of 
these  banks  had  a capital  of  half  a million  or  more,  their  average  capitalization 
being  only  $169,000.  The  banks  generally  in  the  fourteen  years’  interval  had 
gained  immensely  in  strength  as  well  as  in  number,  and  their  power  of  resistance 
to  the  effects  of  the  crisis,  when  it  came,  had  been  correspondingly  increased. 

While  the  profits  of  trade  and  manufacturing  have  been  dwindling,  prophe-ts 
as  to  the  future  of  business  and  prices  have  increased  enormously,  and  they  were 
never  more  numerous  or  more  divided  in  opinion  than  they  are  now.  Some. of 
them  point  to  the  fact  that  with  the  single  exception  of  steel,  in  the  hands  of 
the  United  States  Steel  Corporation,  price.s.  have  declined,  and  they  argue  that 
unless  demand  increases  they  will,  like  stocks  and  wages,  naturally  go  lower,  and 
that  the  Steel  Corporation  will  be  forced  by  the  reductions  already  being  made 
by  the  independent  steel  makers  as  well  as  by  the  heavy  decline  in  iron,  fo 
follow  suit.  These  also  look  for  somewhat  prolonged  depression.  But  many 
other  prophets  are  sanguine  that  we  are  already  seeing  the  worst  of  it,  and  that 
commodity  prices  are  about  as  low  as  they  are  likely  to  go.  The  true  prophets 
are  probably  the  conservatives  who  steer  between  these  conflicting  opinions  and 
avoid  both  extremes.  But  whatever  may  come,  on  the  ebbing  or  rising  tide,  of 
our  business  life,  we  should,  as  Longfellow  says,  “Learn  to  labor  and  to  wait,  with 
a heart  for  any  fate,”  and  at  the  same  time  hold  ourselves  always  ready  to  make 
the  best  of  our  opportunities  as  they  arLe,  and,  as  America  is  pre-eminently  rich 
in  opportunities,  we  shall  not  find  them  waiting  long.  In  any  event,  the  wants 
of  eighty-four  millions  of  our  people  must  be  supplied,  and  we  are  the  most  pro- 
gressive nation  in  the  world.  I therefore  ask — Who’s  afraid? 

I am  quite  of  the  opinion  that  the  time  has  arrived  for  calamity  howling  to 
cease;  there  is  now  no  occasion  for  undue  anxiety.  Caution,  however,  may  be 
necessary,  especially  in  commercial  operations^  The  worst  of  the  financial  de- 
pression has  been  seen  and  the  long-distance  view  is  certainly  more  encouraging 
than  at  any  time  during  the  last  six  months.  Business  men  have  now  no  reason 
to  feel  otherwise  than  confident.  I . firmly  believe  that  recuperation  will  be 
quicker  after  the  recent  panic  than  was  experienced  "after  any  of  the  previous  great 
panics  since  the  one  of  1857. 

Now  is  the  time  for  the  timid  to  develop  bravery,  for  the  strong  to  aid  the 
weak,  for  the  ignorant  to  be  willing  to  learn  from  the  wise.  Let  us  all  work 
together  for  the  common  good,  and  the  upward  tide  will  bear  us  all  along  towards 
better  times  and  lasting  prosperity.  Panics  come  in  cycles  and  it  will  be  years 
before  another  one  can  strike  us.  Let  the  worker  give  his  best  services  to  his 
employer.  Let  the  emploj^er  grant  justice  and  fair  pay  to  the  worker  and  to  all, 
and  the  nightmares  and  storms  of  the  past  year  will  be  forgotten  or  remembered 
onh"  as  a lesson  taught  by  experience,  which  will  serve  to  teach  us  not  to  overdo 
in  the  future  but  to  temper  enterprise  with  conservatism. 


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